Second post:
"2). Continued...
Accounts DD work was done by E&Y. In this recording at 33mins Grech says E&Y interacted with PWC, and SGH have seen exec summary of draft pwc report (pwc report was finalised post signing of the PSD deal, but before completion), thinks they came to same conclusions as him. It'll almost certainly have said rev rec was aggressive (I'm sure WTG are eager to get that E&Y report during disclosure). Hints that E&Y too advised their rev rec was no good as he casually dismisses accountants vs his legendary bottom up, fundamental DD.
http://www.openbriefing.com/OB/Slater---Gordon-Limited/2015/3/30/Equity-Raising/1763.aspx
PSH acquisition slide 19 (Due Diligience Overview) says under Financial/Commercial:
Bottom-up review of quality of earnings; Revenue and acquisition cost recognition policies aligned with Slater and Gordon's more conservative approach
Comprehensive review of Quindell's statutory and management accounts confirmed aggressive approach to reporting performance, resulting in over-investment in NIHL.
SGH will regret their clear and emphatic declaration that they "did not rely" on RF's accounting numbers used for rev rec and wip (did anybody believe them by that point?!), and had Actual Knowledge (which invalidates any misrep claim) that they were not accurate, whether RF was dishonest or simply deluded or both.
The ferrari model thing seems a bit of another sleight of hand. The way they describe it makes it sound like they are trying to conflate that (which relates to some late 2012 period of optimal efficiency to which RF hopes they can return) with RF's experience of 2011 case outcomes (he was CEO of Silverbeck at that time) and which he used for dilution rates. 2011 case experience doesn't seem a very sound basis for RTA rev recognition as intake grew in subsequent years, but proving he was dishonest rather than stupid on scant evidence like this seems optimistic (he was stupid enough to drive the NIHL misadventure on such RTA cashflow expectations; that's not to say I think of RF as a trustworthy character!). I haven't seen the claim schedules with the emails they refer to, and which WTG probably haven't seen either as SGH withheld supporting evidence for their assertions from them and the barrister last year, but I doubt it adds much. Similarly there's some stuff in the alleged "one of more conversation(s)" in meetings where RF reckons there'll have no probs with increasing case intake. They don't even make mention of any evidence in schedules for these convos, so I suspect all they have is RF's simple forecast scenarios spreadsheet they requested to go on. Again, in my view reliance / likely Actual Knowledge of the issues such as backlogs QPP were facing, their professed DD with suppliers of intake etc. makes an already flimsy claim highly unlikely to succeed."
(20min delay)